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Can More Accessory Dwelling Units Fix LA's Housing Shortage?
Amrita Khalid
Amrita Khalid is a tech journalist based in Los Angeles, and has written for Quartz, The Daily Dot, Engadget, Inc. Magazine and number of other publications. She got her start in Washington, D.C., covering Congress for CQ-Roll Call. You can send tips or pitches to amrita@dot.la or reach out to her on Twitter at @askhalid.
Can more accessory dwelling units help a city with a chronic housing shortage?
A wave of new ADU startups that are based in L.A. or serving the region are betting on it. ADU companies like Otto (formerly known as Homestead), which focus on converting pre-existing structures (such as a garage) into housing, serve as a one-stop shop that will help homeowners with financing, design, permitting and labor. Other companies like Azure Printed Homes, Cover, United Dwelling and Villa Homes offer factory-built ADUs that are constructed off-site — also known as “prefab” ADUs. Others still, such as Cottage (based in San Francisco) partner with local contractors and help homeowners design, build and attain permits for their own custom ADUs.
ADUs (also known as granny flats, in-law apartments or backyard homes) describe a category of small, in most cases self-contained homes that can be built beside the original property. A prospect that’s currently trending in Los Angeles, where a chronic housing shortage and sky-high rents coupled with a 2017 state law forcing cities to relax their ADU regulations.
But as novice ADU builders soon discovered, constructing a small house isn’t a small task.
“I wouldn’t say [..building an ADU] is exactly easy, almost anywhere,” said Celeste Goyer, the policy director of Casita Coalition, an L.A.-based organization focused on expanding the use of ADUs for affordable housing throughout the state. “You can’t just go home and pick up a hammer, and have your cousin help you build your ADU. And so expectation management for everyone involved is important.”
The process of getting approved for an ADU normally takes months.
“Generally, many people struggle with the length and complexity of the permitting process and feel like their jurisdictions impose unnecessary red tape in the permitting process,” said Alex Czarnecki, founder and CEO of the custom ADU firm Cottage.
But a number of additional laws may make ADU construction easier in California. Last year Governor Gavin Newsom signed SB 9 into law, which allows California homeowners to build a second house on a single-family zoned lot. Another law known as AB 221 requires local authorities to act on ADU permit applications within 60 days otherwise it’s automatically approved.
“It’s common for certain municipalities to take longer than that to respond to an application or provide incomplete sets of comments,” said Czarnecki. “This drags out timelines for permitting and ultimately impacts the pace at which we can add housing.”
Despite the new laws, few homeowners, Czarnecki said, should attempt to build an ADU by themselves.
“The fact remains that the average homeowner is not a land developer and is not trained or prepared to oversee and manage the design and construction of a new unit on their lot,” added Czarnecki.
To that end, the heads of some ADU companies still believe more has to be done to improve financing the expensive building projects — as well as making them more affordable to low-income and moderate-income individuals. A typical prefab ADU ranges anywhere from $140,000 to $300,000. Custom ADUs are even more expensive. Converting a garage is cheaper, but in L.A., the process can easily approach six figures. None of which factors in the extra costs of permits, which ADU firm Modal estimates costs anywhere between $4,000 to $8,000 in Los Angeles.
There are few mainstream financing options for ADUs available, and renovation loans or cash-out refinancing often don’t cover the entire cost of the project. In a 2021 survey of homeowners by UC Berkeley, nearly 62% said they relied on cash savings or money from a friend or relative to pay for their ADU.
ADU advocates often tout it as an “affordable housing” solution — assuming that property owners will rent them out as an extra source of income. But with the median price of a single-family dwelling in L.A. County almost nearing $1 million, building an ADU is likely an opportunity reserved for more high-income individuals.
“Financing is really the only thing I think of that the city of L.A. and everywhere else really needs to work on. I think L.A. has been doing great with ADU use, and hopefully it will get better,” said Ross Maguire, CEO of Azure Printed Homes.
Samuel Schnieder, the CEO of Otto, said that ADU financing is a major barrier to expansion. Adding that, “It’s often a Catch-22 that the people who are the best equipped or the most enthusiastic about getting an ADU are the ones who can’t necessarily afford it.”
The California Housing Finance Agency this year began offering up to $40,000 in grants for such individuals, but it only covers new ADU “pre-construction” costs, which include everything from impact fees to permits to site prep. In Los Angeles, homeowners with an income below $180,000 qualify for such grants.
A total of 840 people in California have received grants since September — with all but a fraction receiving the full amount, a CHFA spokesperson confirmed to dot.LA.
First launched in 2019, Azure Printed Homes, based out of Culver City, relies on robotic printers to speed up the construction process. The company said it can 3D-print the walls of a 120-square foot unit in less than a day.
Maguire told dot.LA that Azure — which opened up reservations earlier this year — has received pre-orders for 167 units from 119 customers, totaling over $19 million in pre-orders.
But it’s unlikely you’ll see most of these units advertised as new rentals on Craigslist. Maguire says that most of Azure’s customer base desire an ADU to have more space for themselves or to house relatives, rather than to rent out as an additional source of income.
As such, some homeowners opt for factory-built ADUs instead of a more customized option, opting to shorten the timeline for inspections.
“Because our units are pre-approved with the State of California, there’s not a building and safety check that needs to happen on a local level with the city or county of L.A.,” Maguire told dot.LA..
However, even pre-fab ADUs have to be inspected on-site by the local planning authority. “(...the L.A.) Planning Department needs to look at how those modules interact with a specific site themselves, a process that can't be pre-approved as they are site specific,” confirmed a spokesperson for Azure.
In an effort to make the ADU permitting process faster, last year, the city of Los Angeles launched a set of “Standard Plans” that were pre-approved by LADBS. But such plans aren’t cheap — and won’t exempt homeowners from inspections.
“It should be noted that regardless of what pre-approved plan you choose, pre-approved plans still must go through the normal site-specific checks in order for the project to receive a permit,” said Czarnecki.
And if homeowners have the misfortune of building a Standard Plan ADU on an oddly-shaped lot or somewhere with atypical characteristics, they may have to go back to square one. In other words, their ADU will no longer be considered “pre-approved” and will have to go through the longer permitting process.
“Although the Standard Plans are a good jumping off point for creating a product that anyone can use -- at the end of the day, they’re mostly more expensive plans from what I’ve seen,” said Otto’s Schneider.
Casita Coalition and groups like California YIMBY are calling for better financing options for ADUs, particularly those that benefit individual cash-poor homeowners. At present, new ADUs are predominantly built in wealthier, whiter areas. In order for ADUs to actually help bridge the racial-wealth gap, policy experts say they have to actually be a viable option for the less affluent.
“I would be very pleased if more financing options [..for ADUs] developed from credit unions and community financial institutions to provide ADU-tailored loans to help lower income and moderate income home owners build ADUs,” Goyer told dot.LA.
Until then, the dream of Angelenos generating income from their backyards may remain just that.
From Your Site Articles
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- Meet the Culver City Startup Looking to 3D-Print ADUs in Under 24 ... ›
- Can New Tech and ADUs Solve LA’s Housing Crisis? - dot.LA ›
- What Will Take To Make Modular Homes Mainstream? - dot.LA ›
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Amrita Khalid
Amrita Khalid is a tech journalist based in Los Angeles, and has written for Quartz, The Daily Dot, Engadget, Inc. Magazine and number of other publications. She got her start in Washington, D.C., covering Congress for CQ-Roll Call. You can send tips or pitches to amrita@dot.la or reach out to her on Twitter at @askhalid.
https://twitter.com/askhalid
Mars, Money, and Makeovers : LA’s Big Week
08:43 AM | December 06, 2024
🔦 Spotlight
Happy Friday, LA!
This week has been full of energy in LA’s tech world, with some big moves that are hard to ignore. From a local company going public to bold partnerships and exciting projects, here’s a look at the stories driving conversations and shaping what’s happening right now.
ServiceTitan's IPO Ambitions
Image Source: ServiceTitan - Cofounders Ara Mahdessian & Vahe Kuzoyan
ServiceTitan, a Glendale-based software leader for tradespeople like plumbers, electricians, and HVAC technicians, is gearing up for a major step forward: its initial public offering. The company plans to offer 8.8 million shares priced between $52 and $57, targeting a valuation of up to $5.16 billion. Trading under the ticker “TTAN” on the Nasdaq, ServiceTitan’s IPO is backed by financial heavyweights Goldman Sachs and Morgan Stanley. ServiceTitan’s software simplifies essential tasks such as scheduling and payments for trades professionals, providing much-needed solutions in an industry frequently underserved by technology. The IPO reflects both the company’s rapid growth and a broader trend of integrating advanced tools into foundational industries.
SpaceX: Shooting for the Stars (and $350 Billion)
Image Source: SpaceX
SpaceX is on the verge of solidifying its place as the world’s most valuable startup, with insiders estimating a valuation of $350 billion, according to Forbes. It’s not just about rockets anymore; this company has its sights on global internet domination with Starlink and a future where Mars isn’t just science fiction. Investors are clearly betting big on SpaceX’s ability to pull off the impossible—time and time again. The company’s achievements not only redefine the limits of private enterprise but also establish SpaceX as a key player in reshaping humanity’s relationship with space. For the LA tech scene, SpaceX’s valuation is more than a number; it’s a reminder of what’s possible when ambition meets execution. The question isn’t “what’s next?”—it’s “what’s not?”
Anduril x OpenAI: The Future of AI Defense
Image Source: Anduril
In a move that underscores the rapid convergence of defense and cutting-edge AI, Costa Mesa-based Anduril Industries announced a partnership with OpenAI. This collaboration aims to bolster U.S. leadership in artificial intelligence while enhancing national security capabilities. Anduril, known for its autonomous defense technologies, is leveraging OpenAI’s advanced AI systems to supercharge its offerings. The implications? Think faster decision-making and smarter tech on the battlefield. This partnership not only signals Anduril’s commitment to innovation but also highlights the growing importance of AI in reshaping defense.
The Rose Bowl Legacy: Preserving an Icon
Image Source: VisitPasadena
The Rose Bowl, Pasadena’s iconic stadium and a symbol of Southern California’s rich history, is gearing up for an $80 million transformation as part of its "Lasting Legacy Campaign." This effort isn’t just about preparing for the 2028 Olympics—it’s about enhancing the fan experience while staying true to the venue’s historic roots. From new field-level club seats to a cutting-edge videoboard, upgraded Wi-Fi, and even a refurbished marquee sign, this project balances nostalgia with modern innovation. The Rose Bowl has always been more than just a stadium—it’s a cultural landmark that represents LA’s ability to honor its past while embracing the future. If there’s a place that embodies where history meets progress, it’s here.
2024 Wrapped: Your Year in Music
Image Source: Spotify
As the year winds down, music lovers are diving into Spotify Wrapped and Apple Music Replay 2024. These features don’t just highlight our favorite tracks; they showcase how deeply music integrates into our daily lives and memories. For anyone in the tech or startup world, these features are a masterclass in how data-driven personalization can deepen user loyalty and turn casual interactions into powerful engagement.
Whether it’s setting the stage for the next space frontier, advancing national security with AI, or revitalizing a cultural landmark, this week’s stories remind us that progress is as much about preserving what matters as it is about reaching for what’s next.
🤝 Venture Deals
LA Companies
- Nectir, an educational technology company that allows educators to design customized AI teaching assistants providing students with 24/7 personalized support, has raised a $4M Seed funding round led by Long Journey Ventures to develop new features and expand its team. - learn more
- Talus Network, a blockchain platform merging AI and decentralized tech to create smart agents, has raised a $6M Strategic funding round led by Polychain Capital at a $150M valuation to advance its ecosystem, including Protochain, Nexus, and an AI dating app. - learn more
LA Venture Funds
- Alexandria Venture Investments and B Capital participated in a $161M Series B financing round for Nuvig Therapeutics, a California-based biotech company specializing in immunomodulation therapies, to advance its second-generation immunomodulator into Phase 2 clinical development and expand its pipeline. - learn more
- Plus Capital participated in a $35M Series B funding round for Sage, a New York-based company specializing in senior living operations, to enhance its technology platform and expand its services across the U.S. and internationally - learn more
- Supply Chain Capital led a $4.5M Seed funding round for Celleste Bio, a cocoa tech company specializing in cell-cultured cocoa production, to scale its manufacturing capabilities and accelerate sustainable cocoa innovation. - learn more
- Village Global co-led a $5.75M Seed funding round for Across AI, a San Francisco-based startup developing AI-driven enterprise solutions, to accelerate product development and expand its team. - learn more
- M13 led a $5.4M Seed funding round for Cat Labs, an Austin-based startup focused on combating crypto and AI-enabled crime, with the funds being used to develop tools and services that address digital asset security threats. - learn more
- Chapter One Ventures participated in a $4M Seed funding round for Fiamma, a Singapore-based startup focused on decentralized finance infrastructure, with the funds being used to develop innovative tools for secure and efficient on-chain lending. - learn more
- The Games Fund participated in a $3M funding round for Playgama, a gaming platform that simplifies the distribution and monetization of HTML5 games across various platforms; the investment will be used to enhance their Platform-as-a-Service ecosystem, including monetization, quality assurance, and management tools. - learn more
- Fika Ventures led a $6M Seed funding round for StretchDollar, a Pittsburgh and San Francisco-based fintech startup that simplifies health benefits for small businesses through a self-service platform; the funds will be used to enhance their platform and expand their team. - learn more
- OCV participated in a $27.6M funding round for OSSIO, a Woburn, Massachusetts-based medical device company specializing in bio-integrative orthopedic implants; the funds will accelerate commercial efforts, including new product development and establishing a manufacturing and training center in Florida. - learn more
- Avalaunch participated in a $6.5M Seed funding round for Avant, a Palo Alto-based decentralized finance protocol that issues a "stable-value" token called avUSD, to scale its crypto yield products. - learn more
- Rebel Fund participated in a $2.5M Seed funding round for Circleback, a San Francisco startup that uses AI to generate meeting notes and action items, integrating with platforms like HubSpot and Notion; the funding will support expansion and development. - learn more
LA Exits
- Mission Cloud Services, a leading AWS managed services and consulting provider, has been acquired by CDW to enhance its cloud solutions portfolio. - learn more
- Of Kos, formerly VMed, a healthcare marketing agency specializing in digital and creative solutions, has been acquired by ONAR, a global network of marketing agencies, as part of its expansion into the healthcare marketing sector. - learn more
- Rhapsody Voices, a boutique podcast network representing leading content creators and offering tailored solutions for revenue growth through sponsorship representation, content creation, strategy, and marketing, has been acquired by Evergreen Podcasts. - learn more
- TEDIVO, a Long Beach-based software provider specializing in container supply chain tools like BAPLIE Viewer Online, has been acquired by Lynxis to enhance its port orchestration products and improve cargo management efficiency. - learn more
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'We Will Do Anything It Takes': How Service Titan Built Its Product Around the Immigrant Entrepreneurial Experience
06:41 AM | March 18, 2021
Shoeboxes full of invoices and receipts ignited the idea of ServiceTitan for Ara Mahdessian, the company's co-founder and CEO.
An Armenian kid from Iran, Ara immigrated with his family to the U.S. as a young boy. He watched his parents assimilate to their new country while toiling into late hours of the night in order to give their family a good life. Ara said, "I remember my parents would come home...extremely tired, exhausted, dusty and still have hours of work to do...And all this happened at dinner time. It happened after dinner. And so was this work that never ended."
Ara's parents' hard work paid off. Ara attended Stanford where he studied software engineering. He and his co-founder, Vahe Kuzoyan, also a software engineer, applied their knowledge to create automated software for home and commercial service businesses like plumbing and electrical work.
Their software allows for scheduling, dispatching, payroll, recording, payments, invoicing, etc. Ara said one of the most important values to the company is fanatical focus on customer success. "We will do anything it takes to make one of our customers or contractors successful," he said. "If we mess something up, we will go to the end of the world to fix it, even if it cost us an arm and a leg....it's the right thing to do. And it's always worked out for us financially as well.
Ara embodies two of the most significant qualities I look for in founders: a personal connection to the problem they're trying to solve and grit.
Hear why Ara feels having a software engineering background makes him a better leader, what do look for in investment partners and the values he emphasizes at ServiceTitan to ensure a high-quality, supportive and productive company culture.
Ara Mahdessian is the co-founder and CEO of ServiceTitan.
dot.LA Sr. Podcast Producer & Editor Laurel Moglen contributed to this post.
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Spencer Rascoff
Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.
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https://www.linkedin.com/in/spencerrascoff/
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